No let up in sight for retailers

Many high street retailers are feeling the strain of continuing slow trade. National footfall figures continue to falter with January and February figures showing a marked decline (4.6% and 5.4% respectively) on last year.

Traders are suffering now and are girding their loins for another lean year ahead. House of Fraser has shown a 3.9% drop in like-for-like sales compared with last year but still feels it is one of the lucky ones.

French Connection saw its profits slip by £20 million over the same period and is not predicting a rapid recovery as it sees no signs of improvement in the retail climate. Boots ended the year well but is making 1,000 price cuts in a bid to shift stock before its refurbishment programme kicks in. And Woolworth is predicting a flat 2006 having seen its profits fall by 15% (see story in this week's alert).

It would appear that failing consumer confidence is hitting retailers hard at all levels. Rising council taxes and higher fuel bills mean less disposable cash for many. And with consumer borrowing at an all time high a drop in interest rates would offer a last glimmer of hope to many. But the Bank of England is holding out on this one.

However, for some retailers the picture is far from gloomy. There are two clear winners in the race to mop up whatever spare cash is flowing. Sainsbury's and Tesco, the supermarket giants, are going from strength to strength.

These organisations have many natural advantages. They don't depend on high street footfall, which is hampered (particularly in Brighton) by problems of congestion and parking. They have huge buying power and vast human resources. They can also take advantage of long opening hours and even Sunday trading through their new convenience outlets.

Sainsbury's has announced continued growth for the last five months and Tesco, not content with its domination of the grocery market, continues to expand its existing operations while embarking on diversifications into new merchandise sectors and overseas markets.